Working capital management

1. A STUDY ON
WORKING CAPITAL MANAGEMENT

2. Company profile

 Incorporated in June 12 2000
 HQ in Chennai
 other offices in Mumbai, New Delhi, Kolkata and Beijing
 categorized into two segments engineering, procurement and
construction ('EPC') projects and development, sale and
maintenance of WTGs
 WTG & Cooling tower factories in Pondicherry, Chennai and
Umbergaon (Gujarat).
 Joint Venture Partners with Leitwind

3. 
MUNICIPAL
SERVICES
PROCESS AND
METALLURGY
POWER
PLANTS
MINERAL
PROCESSING

4. A study on WORKING CAPITAL
MANAGEMENT

 Objective
 Limitations
 Data sources
 Concept of WC
- Gross Working capital
- Net Working capital
 The need of Working capital management

5. Financial analysis

 Tools are ,
1. Ratio analysis
2. Trend analysis
3. Fund flow analysis
 Classification of Ratio analysis,
1. Balance sheet ratio
2. Revenue Statement ratio
3. Mixed Ratio

6. Current ratio: Current asset / Current
liabilities

Current ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
3.5
3
2.5
2
1.5
1
0.5
0
Current ratio 1.07 1.02 3.18 2.05 1.81

7. Quick ratio: Quick asset / Current
liabilities.

Quick ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
3.5
3
2.5
2
1.5
1
0.5
0
Quick ratio 0.91 0.91 2.92 1.79 1.64

8. Cash holding ratio: Cash / Current
liabilities.

Cash holding ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Cash holding ratio 0.04 0.13 0.66 0.26 0.07

9. Debt equity ratio: Debt / Equity

Ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
6
5
4
3
2
1
0
Ratio 5.52 3.53 2.48 1.5 0.7

10. Inventory turnover ratio : Cost of goods sold

Inventory Turnover Ratio
-----------------------
Avg inventory
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
25
20
15
10
5
0
ratio 1.3 10.7 19.66 13.21 4.19

11. Working capital turnover ratio:
Sales
-------------------------
Net working capital

Net working capital ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
4
3.5
3
2.5
2
1.5
1
0.5
0
Net working capital ratio 3.464655085 2.825140521 0.988901715 1.531023778 2.408260004

12. Fixed asset turnover ratio:
Fixed assets
---------------------
Shareholder’s 
fund
Fixed asset turnover ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
4
3.5
3
2.5
2
1.5
1
0.5
0
Fixed asset turnover ratio 1.66 2.24 2.78 3.36 2.8

13. Net profit ratio :
Net profit after tax x 100
Sales

Net Profit Ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
10%
5%
0%
-5%
-10%
-15%
-20%
Ratio -15% 2% 5% 4% 4%

14. Return on equity:
Net income / Share holder’s equity

ROE
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
40%
20%
0%
-20%
-40%
-60%
-80%
-100%
-120%
ROE -107% 5.02% 14.26% 10.59% 10.55%

15. Interest coverage ratio : EBIT / F I

Interest coverage ratio
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009
12
10
8
6
4
2
0
Interest coverage ratio 0.96 1.44 2.1 3.12 10.7

16. 
 company has some liquidity problem.
 The company’s interest coverage ratio is below the ideal ratio,
this was due to increase in debts.
 A quick ratio is an indication that the firm is liquid and has the
ability to meet its current liabilities in time
 Cash holding ratio ratio shows that company carries only small
amount of cash.
FINDINGs

17. FINDINGs

 the inventory turnover ratio has come down because the
company has spent less in the purchases when compared
with the previous year.
 The funds are not sufficient to finance the fixed assets &
the firm has to depends upon outside to finance fixed
assets.

18. 